Limpopo Business 2017-18 edition

FOCUS LEDA: Enterprise

FOCUS LEDA: Enterprise Development and Finance Division Enabling business to grow while reducing risk. The Enterprise Development and Finance Division (EDFD) within the Limpopo Economic Development Agency (LEDA) provides financial products in support of businesses which are starting out or which need funds to tackle a project. Funding is available in a wide range of sectors, including manufacturing, agri-business (agri-processing), construction, mining and mining beneficiation, tourism, business support services, retail, professional services, transport services and ICT. Projects in the following sectors do not qualify for LEDA products: primary agriculture; infrastructure development; residential and commercial property; explorations; product development and licensing; non-profit organisations(NPOs) and Trusts. Among the most important criteria which the Enterprise Development and Finance Division uses to assess the desirability of a business or project are the possible developmental impact in terms of new jobs being created or a facility being built, proof that there is a viable market for the product or service about to be offered and profitability. Core funding products • Asset / equipment finance • Procurement / bridging finance • Working capital finance • Start-up finance • Franchise finance Although LEDA is active in each of these product divisions, the most popular in recent years has been procurement/bridging finance option. This financial product requires no collateral and is linked to the business owner having a government contract. This reduces risk for all parties. “There are three parties involved,” says Loan Proposals and Origination Manager Chavani Khosa. “There is the employer government department that issues the contract for work, the client (or business undertaking the work) and LEDA. All three parties sign the agreement which states that the whole amount must be paid to LEDA when the client has completed the job.” TEN IMPORTANT STEPS TO SECURE LEDA FUNDING: 1. Safety of the facility 2. Background of the client 3. Financial position of the client 4. Needs of the client 5. Security / collateral 6. Desirability and developmental impact 7. Demonstrate the market 8. Profitability 9. Cash flow available for debt service 10. Source of loan repayment The client needs to show LEDA that he or she has a purchase order from a government department. That will unlock funding to allow work to begin on the project and the client will then submit regular progress reports to LEDA. Once the job is done and the full payment paid to LEDA, the loan amount and interest is subtracted by LEDA and the balance paid out to the client or contractor. In the case of an application being received for a working LIMPOPO BUSINESS 2017/18 26

FOCUS capital finance product, the client must prove that they have a market for the product or service. In addition, says Khosa, “LEDA will go and verify that this is a legitimate business with an on-site inspection.” Then money can be released to buy stock or building materials. LEDA has Business Origination Officers who take clients through the qualification criteria required when an application is made. Any one of these types of business ownership models can apply: sole trader; close corporation; private company; co-operative. Partnerships, policies and profit LEDA has entered into several partnerships as it extends and diversifies its funding portfolio. These include large companies such as Foskor, the Dwarsriver mine near Steelport, provincial government departments, various municipalities, ABSA bank and the Industrial Development Corporation (IDC). The credit policy and the Credit Procedure Manual are under consideration by the approval authority. During the previous financial year, LEDA had a return on investment in the Enterprise Development and Finance division of R4-million. NEW BUSINESS Projected cash flow statement – 12 months Projected financial statements – 3 years Interim financial statements Current budget Bank statement Criteria for funding • The business must be registered • Tax clearance certificate from the relevant authorities is required • Non-refundable application fee. (R500 - R5 000) • Management must comply with the business statues of South Africa • Viable business plan or company profile: EXISTING BUSINESS Cash flow projections – 12 months Financial statements - 3 years Projected financial statements - 3 years Interim financial statements Current budget Bank statements (3 months) BUSINESS AND TECHNICAL TRAINING OFFERED BY LEDA EDFD • Public service supply chain procedure and related processes • Development of business plan • Business customer relations • Business marketing • Understanding income tax • Project management • Financial management • Business cost determination and pricing • Automotive • Construction and building related vocation skills including, bricklaying, plastering, carpentry, plumbing, electrical and welding • Hospitality • Farming and agricultural training BUSINESS SUPPORT OFFERED BY LEDA EDFD • Co-operative development • Business incubation • Business advisory services • Business registration and statutory compliance • Development of business plans and profiles • Business linkages • Mentoring and counselling 27 LIMPOPO BUSINESS 2017/18